Question

Cooperative San José of southern Sonora state in Mexico makes a unique syrup using cane sugar and local herbs. The syrup is sold in small bottles and is prized as a flavoring for drinks and for use in desserts. The bottles are sold for $12 each. The first stage in the production process is carried out in the Mixing Department, which removes foreign matter from the raw materials and mixes them in the proper proportions in large vats. The company uses the weighted-average method in its process costing system.

A hastily prepared report for the Mixing Department for April appears below:

Units to be accounted for:
Work in process, April 1 (materials 90% complete; conversion 80% complete)	7,600
Started into production	37,400
Total units to be accounted for	45,000
Units accounted for as follows:
Transferred to next department	39,800
Work in process, April 30 (materials 75% complete; conversion 50% complete)	5,200
Total units accounted for	45,000

Cost Reconciliation
Cost to be accounted for:
Work in process, April 1	$	23,180
Cost added during the month		126,652
Total cost to be accounted for	$	149,832
Cost accounted for as follows:
Work in process, April 30	$	11,726
Transferred to next department		138,106
Total cost accounted for	$	149,832

Management would like some additional information about Cooperative San José’s operations.

Required:

1. What were the Mixing Department's equivalent units of production for materials and conversion for April?

2. What were the Mixing Department's cost per equivalent unit for materials and conversion for April? The beginning inventory consisted of the following costs: materials, $14,288; and conversion cost, $8,892. The costs added during the month consisted of: materials, $76,608; and conversion cost, $50,044.

3. How many of the units transferred out of the Mixing Department in April were started and completed during that month?

4. The manager of the Mixing Department stated, “Materials prices jumped from about $1.70 per unit in March to $2.20 per unit in April, but due to good cost control I was able to hold our materials cost to less than $2.20 per unit for the month.” Should this manager be rewarded for good cost control?

Answer 1

1
	Materials	Conversion
Units completed and transferred out	39800	39800
Work in process, ending:
5200 X 75%	3900
5200 X 50%		2600
Equivalent units of production	43700	42400
2
	Materials	Conversion
Work in process, April 1	14288	8892
Cost added during April	76608	50044
Total costs	90896	58936
Divide by Equivalent units of production	43700	42400
Cost per Equivalent unit	2.08	1.39
3
Units started and completed	32200	=39800-7600
4
No, the manager should not be rewarded for good cost control.